Media

Employment Class Actions on the Rise

California, having one of the country’s toughest labor laws, entitles employees (even some seemingly salary or commission workers like loan officers) to time and a half for working more than eight hours a day or more than forty hours per week. Such entitlement spurs class action suits like Hoenemier v. Sun Microsystems, where the court certified a class to address whether technical writers are entitled to overtime pay despite being apparently independent, well-educated and highly paid professionals.

To “encourage” employers to provide its employees with a meal period as provided by law, California enacted Assembly Bill 60 in January 2000 requiring employers to pay one hour’s wages to employees who were not given a timely meal period. Such a penalty provision has turned into a “hyper-technical gotcha game”: while the law is conflicted, some courts have certified an employee class action on the basis that the employer is “obligated to ensure the meal period is provided” regardless of the employee’s voluntary decision to forgo a meal period. Cicairos v. Summit Logistic, 133 Cal.App.4th 939 (2005).

In the wake of the notorious Starbucks’ class action awarding $100 million-plus to approximately 100,000 Starbucks “baristas”, the California hospitality industry is reconsidering how California’s strict wage and hour laws could impact their businesses. For example, unlike federal laws, California does not allow employers to credit tip income toward an employee’s minimum wage, which could incite a new type of class action.

In Circuit City v. Gentry, 07-998, the California Supreme Court made it difficult to enforce arbitration agreements that prohibit employees from bringing wage-and-hour claims together in a class action. This decision was bolstered by the U.S. Supreme court’s refusal to review and/or disturb the California Supreme Court’s decision.

Based on a recent survey of legal experts, “wage and hour cases have reached a momentum that’s not about to slow down”. John C. Fox, partner at Manatt Phelps & Phillips in Palo Alto says, “Everybody’s doing meal-and-rest and overtime. The footnote here is that the wage-and-hour tidal wave that has been washing over southern California now has hit us with a five-year delay.”

The Chinese Daily News joined Wal-Mart as one of the few employers faced with a major wage-and-hour claim which went all the way to trial rather than settling. A glimpse of the seemingly unfair jury results: “one employee who had earned $1,200 from short-term, part-time work at the paper ended up with $100,000 for unpaid overtime and lunch breaks. Reporters who completed their work in five to six hours each day and set their own schedules received $1.8 million for overtime and unpaid lunches.” In the same vein, an employee defense attorney stated, “I am embarrassed to tell clients that it may cost more to defend or settle a missed meal-break and rest-period class action than to defend or settle a race discrimination claim from the same alleged class.”

In what has been called the “wage-and-hour onslaught”, employers are facing multimillion-dollar settlements in wage-and-hour class actions. For example, in Perez v. Safety-Kleen Sys., the employer—having no policy in place regarding meal breaks and failing to tell employees that they were required to take breaks—was held liable for one hour for every missed meal or rest period, regardless of whether the employer provided the opportunity for such breaks.

To help mitigate an employer’s potential risks of wage-and-hour class actions, keeping abreast of ever-changing employment laws is crucial.

Plaintiff’s attorneys are jumping on the bandwagon to institute wage-and-hour class actions as well because of the Labor Code’s authorization of attorney fees in certain claims. Further, because attorney fees award provides wage-and-hour claimants with “settlement leverage,” such claimants are using the provision to obtain settlements that are disproportionate to the actual value of the claim.

Despite stellar employment policies under federal law, several nationwide businesses are struggling with the unique California wage and hour requirements, finding that “the entirety of their California profit margin is at risk or in fact evaporated by a single wage-and-hour class action.”

Plaintiffs are successfully arguing recently in two California district court cases that the “employer creates the class” when they “uniformly classified their employees as exempt without paying attention to variations in how individual employees perform their jobs.” This is especially true where the exempt status of an employee does not depend upon the employer’s individualized assessments of an employee’s work, but rather lumping employees together based on, for example, whether they are salaried or work on commission. This is why creation of a job description and evaluation of whether such a position is in fact exempt or non-exempt is so vital.